It's The Perfect Time To Invest In Virtual Reality, Says Boost VC Founder

A fair worker presents VR glasses to promote baby surveillance systems at the booth of Philips at the IFA Consumer Electronics Fair in Berlin in Berlin on August 31, 2017.The fair is open for the public from September 1 to 6, 2017. / AFP PHOTO / TOBIAS SCHWARZ (Photo credit should read TOBIAS SCHWARZ/AFP/Getty Images)

Is Virtual Reality over? Mobile sales have been lackluster, and investors have been disappointed, to say the least. Was the VR boom real but ill-timed, or was it all a dream?

Though naysayers are calling VR and AR a bust, Adam Draper says now if the perfect time to invest. Founder and Managing Director of accelerator Boost VC, Draper has spent the last five years investing in “science fiction” companies: over 180 companies from 30 countries that bring our wildest technological dreams to life through bitcoin, blockchain and VR and AR. Though VR has hit a slump recently, Draper is adamant that VR and AR are still in their early stages of growth. So adamant, in fact, that his next accelerator tribe is 70% VR companies.

I had the opportunity to speak to Draper about how he chooses his companies and why, and what’s next for Boost VC.

Tell me about you?

10 years ago I founded a company called Xpert Financial, a private stock market for trading secondary transactions. Somewhere you would go to buy shares of Uber or Lyft today. It’s a very popular topic today; then it was not so popular, but was a very important topic, because it was at the bottom of the crash. I ran that for about four-and-a-half years with a fantastic co-founder, and then we ran out of money. I failed, a lot, and made every mistake known to man, and by learning from those mistakes I was able to help people to avoid the same mistakes as I did. I started mentoring startups in bulk, and thus founded an accelerator called Boost VC about five years ago.

Our thesis statement is, “Making science fiction a reality.” We have very large communities we’ve built in blockchain and VR, investing in about 200 companies over the last five years, and they are doing really well.

How do you choose those companies?

It’s always by the people. You always want to focus on great people who see the world a little differently, and want to help change society. They need to have a big idea and keep pulling on that thread, and make more right decisions than wrong decisions. Because, really, a startup is literally just a series of unfortunate events where you failed, failed, failed, and failed until you succeed. You want to pick the right people who are just fantastic. That’s what we focus on: in our industry of technology -- VR, blockchain, science fiction -- we focus on the team, market and idea. What we look for is resiliency, but it’s difficult to gauge that in a couple meetings.

You started with blockchain and then you ventured out into VR. How do you see VR market coming together?

Blockchain we got into about four-and-a-half years ago. I was the first investor, I believe, in CoinBase -- who coincidentally announced their big fundraising yesterday -- which defined a big path for me because we ended up focusing on Bitcoin and the blockchain for our entire industry.

Why did you focus there at that time?

It was because no one else was focusing on it. First, it was a differentiator for us. Everyone else was focusing very broadly if they were running an accelerator, and within 50 square miles of us were tons of accelerators. But none of them were focusing on Bitcoin or the blockchain because, quite honestly, it was complicated and no one understood it. I’m not even going to pretend that I understand now on more than a macro level today.

When we announced that we were going to support Bitcoin companies, we became a great lightning rod for activity and fun. We realized just how passionate and tightly integrated the community was: 150 people reached out just to me, and I met with all of them. They intensely believed in it, and that type of community is so worth investing in. We knew that we’d made the right decision there. It’s gone through ups and downs, of course, with right now being a crazy high.

VR, to that point, is on a crazy low, but in a lot of ways, I’m more excited about VR because we are at a nadir, the bottom of sentiment in VR. Everyone is thinking that the numbers are not catching up to what was promised. The problem is when everyone was pitching for an idea versus actually delivering a product is that now there are numbers, and those numbers are not as good as they thought they would be. Everyone thought that it would be mobile adoption, but obviously, that never happened because it’s a new computing platform. Quite honestly, it’s a pain in the ass to put on the headset. The experience has to be good enough to put on a headset, and then it needs to get easier to put on the headset. You have to establish a habit, and creating a habit is harder than the technical challenges.

What I think will happen before adoption is that the first billion dollar company in the VR space will be B2B, selling to the enterprise, because that establishes a habit. It will make someone’s life better, like the Excel spreadsheet did for computers. Suddenly there was a reason to use your computer, and now it’s an efficient machine to help you. That is the adoption cycle. It isn’t mobile. Mobile is a completely different thing, where everyone already has phones so the habit is already established. We have to create a new habit with this new technology.

How are you analyzing startups in that down market? You know that they’re more likely to face challenges getting funding, and particularly where there is a longer cycle like that establishing habits, how do you select startups?

Because everyone has realized that the market has cooled so much, we’re now getting incredible talent. That’s what happens because the expectation isn’t as high as it was for a founder to get funding 24 months ago, even 12 months. We are at a pretty low point for funding but it’s the best time to invest because the bang for your buck is way higher.

We do a lot of blockchain companies, but our next tribe is 70% VR. The accelerator runs twice per year while we provide housing and office space, and we invest in twenty to 25 startups a year: 16 of those companies this year are AR or VR startups.

Given that they are going to have more funding challenges in the future how are they looking at the business model differently?

Figure out where the money and distribution is. You need to hack distribution. For example, everyone has been looking at Oculus and HTC on the Steam or Oculus stores. It’s a monopoly: these are the only ways to distribute a VR system. Suddenly a lot of founders are getting really creative. Honestly, the B2B angle is really interesting, because you aren’t selling through Oculus, you’re going door to door.

Also, there is the new option of VR arcades popping up. Slowly, VR arcades are making a dent in the VR market. It’s like everyone was looking at one way to distribute their product, and it turns out that people are opening doors to other ways to show growth. Numbers are what matters -- angels and VCs need numbers and need to see that there is a market and the trajectory is growing. I honestly think that if any companies in this next six months last for more than two years, they will be a part of the massive growth that is going to be happening. I look at my life in ten years, and I don’t see me not using VR on a consistent basis.

That then suggests a different type of founder set. If they’re going to have to look at alternative distribution mechanisms, it will be difficult if they’re a team of technical founders. You’ll need a broader skill set, don’t you think?

I always believe that people can learn a broader skill set. You need good technology and solving a big problem. I always think that at its core, it’s solving a problem, you’re not building technology for the sake of technology.

But we’re betting very heavily on B2B. We have a company called Primitive that allows you to visualize code. It’s valuable for two reasons: one, you are programming in VR, doing graphical programming. For example, you want this code should be over here, and this over there, and you move it with your hands, just like in Minority Report. That’s his dream.

But he had to start somewhere, and he found that a lot of companies have engineer churn. For instance, to get an engineer up to speed on a project takes three to four months. What if you could decrease that to a month? What they realized is that they could record the CTO walking through the code base visually, and it creates a memory palace. It’s a visual memory palace that you’re actually walking through which helps you to remember it better. People are really grasping it.

There’s also a company called STRIVR which is doing really well, they started with athlete training, and have moved on to businesses. We have a company called VirtualSpeech, teaching people how to communicate better by talking in front of a group of people. These are all really great business use cases that really couldn’t have existed well in a technology before virtual reality. You need that experiential stuff.

Murray Newlands FRSA is an entrepreneur, business advisor and speaker. Newlands is the founder of www.chattypeople.com and chatbot company. Newlands is also an adviser to the Draper Nexus Network of Things Fund that invests in IOT companies. He gives practice advice from the...